Germany: Adoption of the draft legislation for the exchange of CbC Reports

Published on September 28, 2016

On 22nd of September 2016, the German Federal Parliament adopted the draft bill of the Federal Government on the exchange of country-related reports upon the recommendation of the Finance Committee. In the future, an automatic exchange of country-related reports (”Country-by-Country Reports”; ”CbC Reports”) between the tax authorities of the respective contracting states will take place. The exchange of sensitive data, such as revenues or earnings before income tax, will happen only when the conditions referred in Section 8 of the multilateral agreement are fulfilled by the two parties and the privacy policies are respected. One of the requirements mentioned in Section 8 for example asks the respective tax authorities to create a list which contains those tax authorities, with which an exchange of the Country-by-Country Reports is intended. The documents required in order to comply with these conditions need to be submitted to the OECD administration. The content of the reports is limited to the tax paid in the respective countries, the global allocation of income and other indicators of the geographical spread of economic activities of the largest internationally active enterprises.

The information from the reports should serve the tax authorities in the different countries to carry out tax risk management especially in the field of transfer pricing. Further, the tax authorities will be able to recognize and step up the fight against base erosion and profit shifting out of the given information in order to guarantee in this way the competitiveness of exclusively locally active enterprises.